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Cello Group plc (CLL)

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Wednesday 18 September, 2013

Cello Group plc

Interim Results

RNS Number : 2365O
Cello Group plc
18 September 2013
 

 

For Immediate Release

18 September 2013

 

 

Cello Group plc

 

Delivering on the strategy

 

Cello Group plc ("Cello" AIM: CLL, "The Group"), the insight and strategic marketing group, today announces its interim results for the six month period to 30 June 2013.

 

Group Highlights

 

·      Revenue up 14.3% to £71.5m (2012: £62.6m)

·      Gross profit up 7.9% to £34.4m (2012: £31.9m)

·      Like-for-like1 gross profit growth of 4.7%

·      Headline profit before tax2 up 11.0% to £3.5m (2012: £3.2m)

·      Statutory operating profit up 9.0% to £2.1m (2012: £1.9m)

·      Headline basic earnings per share up 5.2% to 3.05p (2012: 2.90p)

·      Statutory basic earnings per share up 22.6% to 1.30p (2012: 1.06p)

·      Interim dividend up 10.3% to 0.64p (2012: 0.58p)

·      Successful acquisition of Mash Healthcare in January 2013

 

Divisional Highlights

 

 

Cello Health

Cello Consumer

£'000

2013

2012

FY 2012

2013

2012

FY 2012

Gross profit

17,341

16,441

31,322

16,742

15,000

32,735

Headline operating profit

3,739

4,106

6,506

1,216

265

2,995

Headline operating margin3

21.6%

25.0%

20.8%

7.3%

1.8%

9.1%

 

·      Continued solid performance from Cello Health

·      Significant improvement in Cello Consumer

 

1  Like-for-like comparisons remove the impact of acquisitions and discontinued operations

2  Headline measures are stated before non-headline charges (see note 2)

3  Headline operating margin is defined as headline operating profit as a percentage of segmental gross profit

 

 

 Mark Scott, Chief Executive, commented:

 

"The refocusing of the Group last year into Cello Health and Cello Consumer has begun to demonstrate its potential to deliver strong performance. The Group had an excellent first six months of the year in both overseas and domestic markets. We look forward to continued progress in the second half and a strong full year outcome."

 



 

 

Enquiries:

 

Cello Group plc (www.cellogroup.com)

 

Mark Scott, Chief Executive

020 7812 8460

Mark Bentley, Group Finance Director

 

 

 

Cenkos Securities

 

Bobbie Hilliam

020 7484 4040

 

 

Buchanan

 

Mark Edwards, Sophie McNulty, Clare Akhurst

020 7466 5000

 

 

Notes to Editors (www.cellogroup.com)

Cello is an insight and strategic marketing group.

The Group's strategy is to create value for shareholders by building an international marketing advisory business able to advise blue chip clients globally, with a primary focus on the pharmaceutical sector, along with other high margin client sectors.

Cello has annualised revenues in excess of £130m, annualised gross profit in excess of £65m and employs over 700 professional staff.

 

 

 

 



 

Chairman's Statement

 

Overview

 

The Group performed strongly in the first six months of the year, with good growth in both revenues and profits. Cello Health performed well and in line with management expectations, with margins remaining highly competitive. Cello Consumer delivered the anticipated recovery in performance, following the refocusing of the business last year.

 

As well as seeing strong performances in its core businesses, operations that were new in 2012 (start-up activities) have also done well, with the majority of them becoming profitable in the first half of the year. The Group continues to benefit from its investment in innovation and digital capacity with a particular focus on contracted revenue streams. The proportion of the Group's income generated by sale of multi-year product-based services continues to rise.

 

The Group's strategy to increase its international footprint continues to make progress, with the opening of new offices in Chicago, Los Angeles and Hong Kong. The Singapore office opened last year has now moved into profit.

 

The Group acquired Mash Healthcare Limited ("Mash") in January 2013. The Board is pleased with the performance of the business post acquisition as part of Cello Health.

 

Cash flow has been strong for the first six months of the year. The balance sheet remains robust, with net debt being in line with management expectations. The Group has low deferred consideration obligations.

 

As a result, the Group is proposing to increase the interim dividend by over 10%.

 

Financial Review

 

Revenue for the six months to 30 June 2013 was up 14.3% to £71.5m (2012: £62.6m) and gross profit was up 7.9% to £34.4m (2012: £31.9m). Like-for-like growth in gross profit was 4.7%. Headline operating profit was up 9.0% to £3.8m (2012: £3.5m). Headline operating margins were 11.1% (2012: 11.1%). Headline pre-tax profit was up 11.0% to £3.5m (2012: £3.2m).

 

Headline basic earnings per share were up 5.2% to 3.05p (2012: 2.90p).

 

The reported tax charge is £0.7m (2012: £0.5m). This represents a headline tax rate of 28.4% (2012: 30.2%) which has fallen due to falling UK tax corporation tax rates.

 

The Group's net debt at 30 June 2013 was £11.4m (31 December 2012: £8.7m; 30 June 2012: £13.7m). This debt figure reflects normal seasonal working capital outflows, and is in line with management expectations. Total debt facilities of £29.0m expire in March 2016.

 

The interim dividend has been increased 10.3% to 0.64p (2012: 0.58p). It is payable on 6 January 2014 to all holders on the register on 6 December 2013. The Group continues a seven year unbroken record of annual dividend growth.

 

The Group incurred a restructuring charge of £0.3m as a result of redundancies created by the increasing convergence of businesses within both Cello Health and Cello Consumer, as the Group pursues efficiency gains. Costs of £0.2m were incurred from continued investment in start-up activity, including software development, and the opening of new overseas offices to support future growth. The following table details the adjustments made to calculate headline operating profit. The acquisition related remuneration charge of £0.6m (2012: £nil) relates to necessary accounting charges arising from the acquisition of Mash.

 

 

 

 

 

 

 

 

 

£m

2013

2012

Headline operating profit

3.8

3.5

Restructuring costs

(0.3)

(0.8)

Start-up losses

(0.2)

(0.3)

Share option charges

(0.1)

(0.1)

Acquisition related remuneration

(0.6)

-

Amortisation

(0.5)

(0.4)

Statutory operating profit

2.1

1.9

Net finance costs

(0.3)

(0.3)

Statutory profit before tax

1.8

1.6

 

Operating Review

 

Cello Health

 

 

 

2013

2012

Full year 2012

 

£'000

£'000

£'000

Gross profit

17,341

16,441

31,322

Operating profit

3,739

4,106

6,506

Operating margin

21.6%

25.0%

20.8%

 

 

Cello Health had a good six months, with overall client spending patterns continuing to be robust. The addition of Mash Healthcare to Cello Health in January 2013 has enhanced the Group's ability to service consumer facing healthcare products.

 

Gross profit increased by 5.5% to £17.3m (2012: £16.4m). After accounting for the impact of the Mash acquisition, this gross profit performance was flat on a like-for-like basis. Like-for-like income growth in the first half of 2012 was 11.1%. This 2013 performance represents a return to more normal levels of margin and profitability for the first half of the year. Margins remained healthy and competitive at 21.6% (H1 2012: 25.0%, FY 2012: 20.6%)). Operating profit fell slightly to £3.7m (2012: £4.1m).

 

The Group's global client penetration remains as strong as ever, with Cello Health continuing to work for nine of the top ten pharmaceutical companies. The introduction of the central new business team in Cello Health has borne fruit, with some notable incremental cross-Group projects that would not otherwise have been won.

 

Cello Health's digital product suite continues to trade strongly, with eVillage (its online community health research product) contributing over £0.5m of revenue in the period. Cello Business Sciences launched its web-based product suite formally in January and has had excellent client uptake in the first six months, with encouraging signs of growth in recurring licence based revenues.

 

Overall, good progress has been made within the organic start-up initiatives that were reported in 2012, as follows:

 

·      In 2012 Cello Health invested in the development of a specialist quantitative research offer, IQ, incurring costs of £0.2m in 2012. In 2013 there have been 28 projects which have included this offer within them, with a gross profit value of £0.8m.

 

·      In 2012 Cello Health started a Consumer Health business within its Brand Consulting Business, The Value Engineers, incurring start-up losses in 2012 of £0.1m. The business has won several clients in 2013, and is sustainably profitable looking forward. This development complements the recent acquisition of Mash Healthcare, continuing to expand Cello Health's exposure to the Consumer Health marketplace.

 

·      Within its consulting offer, Cello Health started Cello Business Sciences in 2012, with associated start-up losses. This business has now developed award winning proprietary software to enable clients to evaluate and track the return on investment achieved by marketing campaigns. Uptake has been good from a wide range of clients who buy services on a project consultancy basis and by buying software licences.

 

Cello Health has also commenced further expansion activity in 2013 with the opening of a Chicago office and with the commencement in the US of an early stage market access consultancy. Both these initiatives have had early client project wins and the Group is confident of profitable outcomes in future years from these activities.

 

Considerable internal progress has been made regarding brand consolidation, with a view to external launch in early 2014. The continued growth of Cello Health is a key strategic priority for the Group, and opportunities for further investment in the form of start-up ventures and acquisitions are being actively appraised.

 

The major new business wins achieved in the first six months of 2013 included: Abellio, Ahlstrom, Avia, Bauer Media, BI Global and Domestic, Biogen Idec, Chamberlain, Colgate Palmolive, Eisai, FCA, GSK Oncology, House Foods, Hug, Johnson & Johnson, Kimberly Clark, Medtronic, Nexus, NHS Blood Transfusions, NHS Business Services Authority, Otsuka, Pfizer, PruHealth, Saint Gobain, Sanofi, Shire and Terumo.

 

Cello Consumer

 

 

2013

2012

Full year 2012

 

£'000

£'000

£'000

Gross profit

16,742

15,000

32,735

Operating profit

1,216

265

2,995

Operating margin

7.3%

1.8%

9.1%

 

Cello Consumer had a strong six months, reflecting the benefit of the focused growth strategy implemented in 2012. This was driven by continued recovery in core activity areas, including improved consumer market research spend, improved client activity in financial services and an increasingly strong strategic position in Scotland. It was also a reflection of Cello Consumer's growing strength in digital products, and the increasing proportion of its revenues won and serviced in the US and Asia.

 

Gross profit increased by 11.6% to £16.7m (2012: £15.0m). The improvement that was seen in the second half of 2012 has been maintained into the first half of 2013, consequently like-for-like growth in gross profit was 9.7%. Operating profit rose to £1.2m (2012: £0.3m), and operating margins recovered to more normal levels at 7.3% (2012: 1.8%).

 

The digital orientation of Cello Consumer is strengthening rapidly. Pulsar TRAC (www.pulsarplatform.com), Cello Consumer's advanced social intelligence platform, has been formally launched to an excellent client response. This product analyses and interprets social media data and allows the user to mine data by topic, by audience, and by content.

 

Brightsource, the Group's data-driven marketing communications consultancy, has continued to grow strongly, with technological and digital solutions to client problems being at the fore of the offer. In addition, Cello Consumer's organically started pure digital agency, Blonde, has experienced significant gross profit growth this year, and has recently been appointed to the digital roster for the Scottish Government.

 

Cello Consumer's international profile continues to make rapid strides. The Group's research business in Singapore is now profitable and is regularly securing new mandates. An additional office has been opened in Hong Kong. Cello Consumer's research business on the West Coast of the USA has opened a Los Angeles office and gross profit has broken through the £1.0m barrier in the first six months of the year. This office is expected to be profitable by the end of the year. Cello Consumer continues to review new office opportunities in Asia, the USA and Africa.

 

Cello Consumer has made good progress in moving from a project based revenue profile to a more contracted, recurring revenue profile. The retained income base of Cello Consumer has grown considerably so far this year, with the addition of several large tracker research clients, as well as the extension of a core retained financial services client.

 

With the recovery in performance, the Group is once again prepared to back the accelerated growth of Cello Consumer through a mixture of selected start-up ventures, investment in software and focused acquisitions. As an example, Cello Consumer's offer in Scotland has been enhanced in June 2013 by the acquisition of the trade and certain assets of Newhaven Communications.

 

The major new business wins achieved in the first six months of 2013 include: Anheuser Busch, Audi (Asia), Barnes & Noble, Bauer Media, Border Biscuits, British Red Cross, CBRE, Disney (Asia), Costa, Economist, Electrical Safety Council, Eurostar, Fantasy Football Manager, Halo Foods, HALO Trust, Hearst Magazines, Hilti, International Cancer Research, Michelmores, Nestle, Nokia, Oliver Bonas, ONS, Pizza Express, Prostate Cancer UK, Quality Meat Scotland, Reckitt Benckiser, Royal British Legion, Russell Brands, Scottish Government, SingTel (Asia), Spar, The Ritz Carlton, Unilever, Visit England and Wells and Young.

 

Talking Taboos Foundation

 

Building on its 2012 research programme into the area of self-harm amongst teenagers, the Group has invested in the launch of an independent charity to support the continuation of such activity on a sustainable basis. The Talking Taboos Foundation will be launched later in 2013, chaired by Vincent Nolan.

 

Current Trading and Outlook

 

The robust trading that the Group has experienced in the first half of the year has continued over the summer period. The Board remains confident that full year expectations will be met.

 

 

Allan Rich,

Chairman

18 September 2013



Condensed Consolidated Income Statement

For the six months ended 30 June 2013

 

 

 

 

 

Notes

Unaudited

Six months ended

30 June 2013

£'000

Unaudited

 Six months ended

30 June 2012

£'000

Audited

Year ended

 31 December 2012

£'000

 






 

Continuing operations





 

Revenue

5

71,548

62,616

135,141

 

Cost of sales


(37,163)

(30,762)

(70,046)

 



                       

 

Gross profit

5

34,385

31,854

65,095

 






 

Administration expenses


(32,332)

(29,971)

(63,079)

 



                      

 

Operating profit

5

2,053

1,883

2,016

 






 

Finance income

6

10

25

76

 

Finance costs

6

(285)

(319)

(712)

 



                            

 

Profit on continuing operations before taxation

5

1,778

1,589

                       1,380

 






 

Taxation

7

(722)

(514)

(1,224)

 



                            

 

Profit on continuing operations after taxation


1,056

1,075

156

 






 

Loss from discontinued operations

10

-

(235)

(516)

 



                            

 

Profit/(loss) for the year


1,056

840

(360)

 



                            

 

Attributable to:





 

Owners of the parent


1,059

825

                         (386)

 

Non-controlling interests


(3)

15

                        26



                          

 



1,056

840

(360)

 



                            

 






 






 



Unaudited

Six months ended

30 June 2013

£'000

Unaudited

Six months ended

30 June 2012

£'000

Audited

Year ended

31 December 2012

£'000

 

Basic earnings/(loss) per share





 

From continuing operations

11

1.30p

1.37p

0.16p

 

From discontinued operations

11

0.00p

(0.30)p

(0.65)p

 

Total

11

1.30p

1.06p

(0.49)p

 






 






 

Diluted earnings/(loss) per share





 

From continuing operations

11

1.29p

1.32p

0.16p

 

From discontinued operations

11

0.00p

(0.30)p

(0.65)p

 

Total

11

1.29p

1.03p

(0.49)p

 






 






 

 



Condensed Consolidated Statement of Comprehensive Income

For the six months ended 30 June 2013

 


 

Unaudited

Six months ended

30 June 2013

£'000

Unaudited

Six months ended

30 June 2012

£'000

Audited

Year ended

31 December 2012

£'000


 




Profit/(loss) for the year

 

1,056

840

(360)


 




Other comprehensive income:

 




Exchange differences on translation of foreign operations

39

(78)

(287)


 

              

              

Total comprehensive income for the year

 

1,095

762

(647)


 

              

              

Total comprehensive income attributable to:

 




Owners of the parent

 

1,098

747

(673)

Non-controlling interests

 

(3)

15

26


 

              

              

Total comprehensive income for the year

 

1,095

762

(647)


 

              

              


 




Total comprehensive income attributable to owners of the parent arises:



From continuing operations

 

1,098

982

(164)

From discontinued operations

 

-

(235)

(509)


 

              

              

Total comprehensive income attributable to owners of the parent

1,098

747

(673)


 

              

              

 

 

           

 

 



Condensed Consolidated Balance Sheet

As at 30 June 2013

 

 


 

 

Notes

 

Unaudited

At 30 June 2013

£'000

Unaudited

At 30 June 2012

£'000

Audited

At 31 December 2012

£'000

 






 

Goodwill

12

71,498

73,746

71,028

 

Intangible assets


1,964

2,065

1,790

 

Property, plant and equipment


2,272

2,397

2,289

 

Deferred tax assets


566

580

463

 



               

               

               

 

Non-current assets


76,300

78,788

75,570

 



               

               

               

 






 

Trade and other receivables


28,013

26,944

29,935

 

Cash and cash equivalents


3,449

1,221

4,148

 



               

               

               

 

Current assets


31,462

28,165

34,083

 



               

               

               

 






 

Trade and other payables


(24,285)

(22,235)

(29,717)

 

Current tax liabilities


(1,306)

(762)

(582)

 

Borrowings


(2,030)

(852)

(498)

 

Provisions


(116)

(360)

(108)

 

Obligations under finance leases


(19)

(31)

(23)

 

Derivative financial instruments


-

(34)

(5)

 



               

               

               

 

Current liabilities


(27,756)

(24,274)

(30,933)

 



               

               

               

 

Net current assets


3,706

3,891

3,150

 



               

               

               

 

Total assets less current liabilities


80,006

82,679

78,720

 



               

               

               

 






 

Borrowings


(12,739)

(13,958)

(12,320)

 

Provisions


(230)

(158)

(280)

 

Obligations under finance leases


(13)

(31)

(26)

 

Deferred tax liabilities


(479)

(656)

(498)

 



               

               

                

 

Non-current liabilities


(13,461)

(14,803)

(13,124)

 



               

               

                

 

Net assets


66,545

67,876

65,596

 



               

               

              

 






 

Equity





 

Share capital

14

8,268

8,226

8,226

 

Share premium


18,224

18,188

18,188

 

Merger reserve


28,322

29,640

28,228

 

Capital redemption reserve


50

50

50

 

Retained earnings


11,302

11,375

10,636

 

Share-based payment reserve


418

274

343

 

Foreign currency reserve


(85)

85

(124)

 



              

              

              

 

Equity attributable to equity holders of parent


66,499

67,838

65,547






 

Non-controlling interests


46

38

49

 



              

              

              

 

Total equity


66,545

67,876

65,596

 



              

              

              

 

 

 

 

 

 



Condensed Consolidated Cash Flow Statement

For the six months ended 30 June 2013


 

 

 

Notes

Unaudited

Six months ended

30 June 2013

£'000

Unaudited

Six months ended

30 June 2012

£'000

Audited

Year ended

31 December 2012

£'000






 

Net cash generated from operating activities before taxation

15

291

(1,146)

6,835






Tax paid


(372)

(1,002)

(1,874)



              

              

              

 

Net cash generated from operating activities after taxation


(81)

(2,148)

4,961



              

              

              






Investing activities





Interest received


5

4

26

Purchase of property, plant and equipment


(503)

(767)

(1,432)

Sale of property, plant and equipment


2

63

75

Expenditure on intangible assets


(160)

(144)

(358)

Purchase of subsidiary undertakings


(828)

(1,682)

(2,037)



              

              

              

 

Net cash used in investing activities


(1,484)

(2,526)

(3,726)



              

              

              






Financing activities





Dividends paid to equity holders


(476)

(429)

(1,386)

Repayment of borrowings


(3,000)

(800)

(3,800)

Repayment of loan notes


(84)

(617)

(461)

Drawdown of borrowings


3,024

4,000

5,500

Increase in overdrafts


1,616

206

-

Capital element of finance lease payments


(17)

(37)

(50)

Interest paid


(253)

(588)

(911)



              

              

              

Net cash generated/(used) in financing activities


810

1,735

(1,108)



              

              

              






Movements in cash and cash equivalents





Net (decrease)/increase in cash and cash equivalents


(755)

(2,939)

127

Exchange gains/(losses) on cash and bank overdrafts


56

(10)

(149)

Cash and cash equivalents at the beginning of the period


4,148

4,170

4,170



              

              

              

Cash and cash equivalents at end of the period


3,449

1,221

4,148



              

              

              






 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statement of Changes in Equity

For the six months ended 30 June 2013

 

Statement of changes in equity for the six months ended 30 June 2013:


Share

Capital

£'000

Share

 Premium

£'000

Merger Reserve

£'000

Capital Redemption Reserve

£'000

Retained Earnings

£'000

Share-based Payment Reserve

£'000

Currency

Exchange Reserve

£'000

Attributable to Equity Shareholders

£'000

Non-Controlling Interest

£'000

Total

Equity

£'000












At 1 January 2013

8,226

18,188

28,228

50

10,636

343

(124)

65,547

49

65,596


          

          

          

          

          

          

          

                

          

              












Profit for the period

-

-

-

-

1,059

-

-

1,059

(3)

1,056












Other comprehensive income:











Currency translation

-

-

-

-

-

-

39

39

-

39


          

          

          

          

          

          

          

                

          

              

Total comprehensive income in the period

 

-

 

-

 

-

 

-

 

1,059

 

-

 

39

 

1,098

 

(3)

 

1,095


          

          

          

          

          

          

          

                

          

              












Transactions with owners:











Shares issued

42

36

94

-

-

-

-

172

-

172

Credit for share-based incentives

 

-

 

-

 

-

 

-

 

-

 

75

 

-

 

75

 

-

 

75

Deferred tax on share-based payments recognised directly in equity

 

 

-

 

 

-

 

 

-

 

 

-

 

 

83

 

 

-

 

 

-

 

 

83

 

 

-

 

 

83

Dividends paid

-

-

-

-

(476)

-

-

(476)

-

(476)


          

          

          

          

          

          

          

                

          

              

Total transactions with owners

 

42

 

36

 

94

 

-

 

(393)

 

75

 

-

 

(146)

 

-

 

(146)


          

          

          

          

          

          

          

                

          

              












As at 30 June 2013

18,224

28,322

50

11,302

418

66,499

46

66,545


          

          

          

          

          

          

          

                

          

              












 

Statement of changes in equity for the six months ended 30 June 2012:


Share

Capital

£'000

Share

 Premium

£'000

Merger Reserve

£'000

Capital Redemption Reserve

£'000

Retained Earnings

£'000

Share-based Payment Reserve

£'000

Currency

Exchange Reserve

£'000

Attributable to Equity Shareholders

£'000

Non-Controlling Interest

£'000

Total

Equity

£'000












At 1 January 2012

7,853

18,104

28,742

50

10,389

209

163

65,510

613

66,123


          

          

          

          

          

          

          

                

          

              












Profit for the period

-

-

-

-

825

-

-

825

15

840












Other comprehensive income:











Currency translation

-

-

-

-

-

-

(78)

(78)

-

(78)


          

          

          

          

          

          

          

                

          

              

Total comprehensive income in the period

 

-

 

-

 

-

 

-

 

825

 

-

 

(78)

 

747

 

15

 

762


          

          

          

          

          

          

          

                

          

              

Transactions with owners:











Shares issued

373

84

898

-

-

-

-

1,355

-

1,355

Credit for share-based incentives

 

-

 

-

 

-

 

-

 

-

 

65

 

-

 

65

 

-

 

65

Changes in non-controlling interests in share holdings

 

-

 

-

 

-

 

-

 

590

 

-

 

-

 

590

 

(590)

 

-

Dividends paid

-

-

-

-

(429)

-

-

(429)

-

(429)


          

          

          

          

          

          

          

                

          

              

Total transactions with owners

 

373

 

84

 

898

 

-

 

161

 

65

 

-

 

1,581

 

(590)

 

991


          

          

          

          

          

          

          

                

          

              

As at 30 June 2012

8,226

18,188

29,640

50

11,375

274

85

67,838

38

67,876


          

          

          

          

          

          

          

                

          

              

 

 

Statement of changes in equity for the year ended 31 December 2012:


Share

Capital

£'000

Share Premium

£'000

Merger Reserve

£'000

Capital Redemption Reserve

£'000

Retained Earnings

£'000

Share-based Payment Reserve

£'000

Currency Exchange Reserve

£'000

Attributable to Equity Shareholders

£'000

Non-Controlling Interest

£'000

Total

Equity

£'000












At 1 January 2012

7,853

18,104

28,742

50

10,389

209

163

65,510

613

66,123


          

              

              

          

               

          

          

               

          

               












Loss for the period

-

-

-

-

(386)

-

-

(386)

26

(360)












Other comprehensive income:











Currency translation

-

-

-

-

-

-

(287)

(287)

-

(287)


          

              

              

          

               

          

          

               

          

               

Total comprehensive income for the period

 

-

 

-

 

-

 

-

 

(386)

 

-

 

(287)

 

(673)

 

26

 

(647)


          

              

              

          

               

          

          

               

          

               












Transactions with owners:











Shares issued

373

84

898

-

-

-

-

1,355

-

1,355

Credit for share-based incentives

 

-

 

-

 

-

 

-

 

-

 

134

 

-

 

134

 

-

 

134

Deferred tax on share-based payments recognised directly in equity

 

 

-

 

 

-

 

 

-

 

 

-

 

 

17

 

 

-

 

 

-

 

 

17

 

 

-

 

 

17

Changes in non-controlling interests in shareholdings

-

-

-

-

590

-

-

590

(590)

-

Transfer between reserves in respect of impairment

 

-

 

-

 

(1,412)

 

-

 

1,412

 

-

 

-

 

-

 

-

 

-

Dividends paid

-

-

-

-

(1,386)

-

-

(1,386)

-

(1,386)


          

              

              

          

               

          

          

               

          

               

Total transactions with owners

 

373

 

84

 

(514)

 

-

 

633

 

134

 

-

 

710

 

(590)

 

120


          

              

              

          

               

          

          

               

          

               

As at 31 December 2012

 

8,226

 

18,188

 

28,228

 

50

 

10,636

 

343

 

(124)

 

65,547

 

49

 

65,596


          

              

              

          

               

          

          

               

          

               

 

 

 



Notes to the Financial Information

For the six months ended 30 June 2013

 

1.   ACCOUNTING POLICIES AND BASIS OF PREPARATION

 

The condensed consolidated financial information for the six months ended 30 June 2013 has been prepared in accordance with IAS 34 Interim Financial Reporting, as adopted by the European Union. The condensed consolidated financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2012, which have been prepared in accordance with IFRSs as adopted by the European Union.

 

The condensed consolidated financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2012 were approved by the Board of directors on 12 March 2013 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.

 

The condensed consolidated financial information was approved for issue on 18 September 2013 and has not been audited.

 

The accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2012, as described in those annual financial statements.

 

There are no new IFRSs or IFRICs that are effective for the first time for the interim period that would be expected to have a material impact on the Group.



2.   HEADLINE MEASURES

 

The Group believes that reporting non-GAAP or headline measures provides a useful comparison of business performance and reflects the way the business is controlled. Accordingly headline measures of operating profit, finance income, finance costs, profit before taxation and earnings per share exclude, where applicable, restructuring costs, start-up losses, amortisation of intangible assets, impairment charges, acquisition accounting adjustments, share option charges, fair value gains and losses on derivative financial instruments and other exceptional costs. Non-headline gains and losses are items that, in the opinion of the directors, are required to be disclosed separately, by virtue of their size or incidence, to enable a full understanding of the Group's financial performance.

 

A reconciliation between statutory and headline profit before taxation is presented in note 4. In addition to this a reconciliation between statutory and headline finance income and costs is presented in note 6 and a reconciliation between statutory and headline earnings per share is presented in note 11. Headline measures in this report are not defined terms under IFRS and may not be comparable with similarly titled measures reported by other companies.

 

3.   SEASONALITY OF OPERATIONS

 

The Cello Health division is not materially influenced by seasonal factors. However, there are a number of clients in the Cello Consumer division who traditionally commission activity in the second half of the year leading to increased revenues for that period with respect to those clients.

 

4.   RECONCILIATION OF PROFIT FROM CONTINUING OPERATIONS BEFORE TAXATION TO

      HEADLINE PROFIT BEFORE TAX

 


Unaudited

Six Months ended

 30 June 2013

£'000

Unaudited

Six Months ended

 30 June 2012

£'000

Audited

Year ended

 31 December 2012

£'000





Profit from continuing operations before taxation

1,778

1,589

1,380

Restructuring costs

314

747

1,328

Start-up losses

217

335

787

Acquisition costs

66

-

-

Amortisation of intangible assets

545

431

876

Acquisition related employee remuneration expense

529

24

82

Share option charges

75

65

134

Impairment of goodwill

-

-

2,497

Fair value gain on derivative financial instruments

(5)

(21)

(50)


              

              

              

Headline profit before taxation

3,519

3,170

7,034


              

              

              

Headline profit before tax is made up as follows:




Headline operating profit

3,799

3,485

7,720

Headline finance income

5

4

26

Headline finance costs

(285)

(319)

(712)


              

              

              


3,519

3,170

7,034


              

              

              

 

 

5.   SEGMENTAL INFORMATION

 

For management purposes, the Group is organised into two operating groups; Cello Health and Cello Consumer. These groups are the basis on which the Group reports internally to the plc's board of directors, who have been identified as the chief operating decision makers.



 

Six months ended 30 June 2013





 

 

 

Cello Health

£'000

 

Cello Consumer

£'000

Consolidated and Unallocated £'000

 

Group £'000

Revenue





External sales

25,230

45,926

-

71,156

Intersegment revenue

-

28

(28)

-


                  

                  

                  

                  

Total segmental revenue

25,230

45,954

(28)

71,156


                  

                  

                  


Start-up revenue




392





                  

Total revenue




71,548





                  

Gross profit





Segmental gross profit

17,341

16,742

-

34,083


                  

                  

                  







Start-up gross profit




302





                  

Total gross profit




34,385





                  

Operating profit





Headline operating profit (segment result)

3,739

1,216

(1,156)

3,799


                  

                  

                  


Restructuring costs




(314)

Start-up losses




(217)

Acquisition costs




(66)

Amortisation of intangible assets




(545)

Acquisition related employee remuneration expense




(529)

Share option charges




(75)





                  

Operating profit




2,053






Financing income




10

Finance costs




(285)





                  

Profit from continuing operations before taxation




1,778
                  






Other information










Capital expenditure

99

402

2

503


                  

                  

                  

                  

Capitalisation of intangible assets

601

160

-

761


                  

                  

                  

                  

Depreciation of property plant and equipment

223

333

2

558


                  

                  

                  

                  

 



 

Six months ended 30 June 2012





 

 

 

 

Cello Health £'000

 

Cello Consumer £'000

Consolidated and Unallocated
£'000

 

Group £'000

Revenue





External sales

24,235

37,776

-

62,011

Intersegment revenue

27

35

(62)

-


                  

                  

                  

                  

Total segmental revenue

24,262

37,811

(62)

62,011


                  

                  

                  


Start-up revenue




605





                  

Total revenue




62,616





                  

Gross profit





Segmental gross profit

16,441

15,000

-

31,441


                  

                  

                  







Start-up gross profit




413





                  

Total gross profit




31,854





                  

Operating profit





Headline operating profit (segment result)

4,106

265

(886)

3,485


                  

                  

                  


Restructuring costs




(747)

Start-up losses




(335)

Amortisation of intangible assets




(431)

Acquisition related employee remuneration expense




(24)

Share option charges




(65)





                  

Operating profit




1,883






Financing income




25

Finance costs




(319)





                  

Profit from continuing operations before taxation




1,589





                  

Other information










Capital expenditure

332

452

-

784


                  

                  

                  

                  

Capitalisation of intangible assets

48

96

-

144


                  

                  

                  

                  

Depreciation of property plant and equipment

188

347

5

540


                  

                  

                  

                  






 



 

Year ended 31 December 2012





 

 

 

 

Cello Health £'000

Cello Consumer £'000

Consolidated and Unallocated
£'000

 

Group £'000

Revenue





External sales

46,247

87,457

-

133,704

Intersegment revenue

100

88

(188)

-


                  

                  

                  

                  

Total segmental revenue

46,347

87,545

(188)

133,704


                  

                  

                  


Start-up revenue




1,437





                  

Total revenue




135,141





                  

Gross profit





Segmental gross profit

31,322

32,735

-

64,057


                  

                  

                  







Start-up gross profit




1,038





                  

Total gross profit




65,095





                  

Operating profit





Headline operating profit (segment result)

6,506

2,995

(1,781)

7,720


                  

                  

                  


Restructuring costs




(1,328)

Start-up losses




(787)

Amortisation of intangible assets




(876)

Acquisition related employee remuneration expense




(82)

Share option charges




(134)

Impairment of goodwill




(2,497)





                  

Operating profit




2,016






Financing income




76

Finance costs




(712)





                  

Profit from continuing operations before taxation




1,380





                  

Other information










Capital expenditure

605

843

1

1,449


                  

                  

                  

                  

Capitalisation of intangible assets

102

256

-

358


                  

                  

                  

                  

Depreciation of property plant and equipment

391

728

8

1,127


                  

                  

                  

                  








6.   FINANCE INCOME AND COSTS

 


Unaudited

Six months ended

30 June 2013

£'000

Unaudited

Six months ended

30 June 2012

£'000

Audited

Year ended

31 December 2012

£'000

Finance income:




Interest receivable on bank deposits

5

4

26


              

              

              

Headline finance income

5

4

26





Fair value gains on derivative financial instruments

5

21

50


              

              

              

Total finance income

10

25

76


              

              

              





Finance costs:




Interest payable on bank loans and overdrafts

278

289

649

Interest payable in respect of finance leases

3

3

6

Finance costs paid on derivative financial instruments

4

27

57


              

              

              

Total and headline finance costs

285

319

712


              

              

              

 

7.   TAXATION ON PROFIT ON ORDINARY ACTIVITIES

 

The tax charge for the period ended 30 June 2013 is based on management's estimate of weighted average annual tax rate expected for the full financial year. The estimated average annual tax rate used is 28.4% (2012: 30.2%).

 

8.   DIVIDEND


 

 

 

Date Paid

Unaudited

Six months ended  30 June 2013

£'000

Unaudited

Six months ended  30 June 2012

£'000

Audited

Year ended

31 December 2012

£'000






Interim dividend 2011 - 0.55p per share

06 January 2012

-

429

429

Final dividend 2011 - 1.17p per share

06 July 2012

-

-

957

Interim dividend 2012 - 0.58p

06 January 2013

476

-

-



                  

                  

                  



476

429

1,386



                  

                  

                  











An interim dividend of 0.64p (2012: 0.58p) per ordinary share is declared and will be paid on 6 January 2014 to all shareholders on the register on 6 December 2013. In accordance with IAS 10 Events after the Balance Sheet Date, this dividend has not been recognised in the accounts at 30 June 2013, but will be recognised in the accounting period ending 31 December 2014. A final dividend of 1.42p (2012: 1.17p) per ordinary share was paid on 5 July 2013, to all shareholders on the register on 31 May 2013.

 

9.   RESTRUCTURING COSTS, START-UP LOSSES AND ACQUISITION COSTS

 

Restructuring costs, start-up losses and acquisition costs have been separately disclosed in order to assist in understanding the financial performance of the Group.

 

Restructuring costs principally relate to redundancy costs.

 

Start-up losses are defined as the net operating result in the period of the trading activities that relate to new offices, new products, or new organically started businesses. Activities so defined will cease being separately identified where, in the opinion of the directors, the activities show evidence of becoming sustainably profitable or are closed, whichever is earlier. In any event start-up losses will cease being separately identified after two years from the commencement of the activity.

 

Acquisition costs relate to professional costs incurred in relation to acquisitions.



10.   DISCONTINUED OPERATIONS

 

There are no discontinued operations in the current period. The loss from discontinued operations in the six months ended 30 June 2012 relates to Farm, Magnetic and Leapfrog in America Inc. Farm was a division of Tangible UK Limited, a wholly owned subsidiary of the Group. Magnetic was a division of Brightsource limited, a wholly owned subsidiary of the Group. Leapfrog in America Inc is a wholly owned subsidiary of the Group. The operations of Farm, Magnetic and Leapfrog in America Inc are included as discontinued operations in the prior year because their activities ceased during the year ended 31 December 2012.

 

In accordance with IFRS 5 Non-current assets held for sale and discontinued operations, the income statement for the six months ended 30 June 2012 has been re-presented to include income and expenses of the discontinued operations within (loss)/profit from discontinued operations.

 

The financial performance and cash flow of the discontinued operations are as follows:

 


Unaudited

Six months ended 30 June 2013

£'000

Unaudited

Six months ended 30 June 2012

£'000

Audited

Year ended

31 December 2012

£'000





Revenue

-

1,643

2,703

Cost of sales

-

(1,198)

(2,041)


               

                

                

Gross profit

-

445

662





Administrative expenses

-

(759)

(1,279)


               

                

                

Loss before tax from discontinued operations

-

(314)

(617)





Taxation

-

79

101


               

                

                

Loss in the period from discontinued operations

-

(235)

(516)


               

                

                

Loss for the period from discontinued operations is attributable to:




Equity holders of the parent

-

(235)

  (516) 

Non-controlling interest

-

-

-


               

                

                


-

(235)

(516)


               

                

                

 


Unaudited

Six months ended 30 June 2013

£'000

Audited

Six months ended 30 June 2012

£'000

Audited

Year ended

31 December 2012

£'000





Operating cash inflows

-

52

147

Investing cash outflows

-

(24)

(30)


                

                

                

Total cash flows

-

28

117


                

                

                

           

11.   EARNINGS/(LOSS) PER SHARE


Unaudited

Six months ended

30 June 2013

£'000

Unaudited

Six months ended

30 June 2012

£'000

Audited

Year ended

31 December 2012

£'000





Earnings attributable to owners of the parent

1,059

825

(386)

Loss from discontinuing operations

-

235

516


                

                

                

Earnings attributable to ordinary shareholders from continuing operations

 

1,059

 

1,060

 

130

Non-controlling interests

(3)

15

22


                

                

                

Earnings from continuing operations

1,056

1,075

152





Adjustments to earnings:




Restructuring costs

314

747

1,328

Start-up losses

217

335

787

Acquisition costs

66

-

-

Amortisation of intangible assets

545

431

876

Acquisition related employee remuneration expense

529

24

82

Share-based payments charge

75

65

134

Impairment of goodwill

-

-

2,497

Fair value gain on derivative financial instruments

(5)

(21)

(50)

Tax thereon

(318)

(410)

(766)


                

                

                

Headline earnings attributable to ordinary shareholders

2,479

2,246

5,040


                

                

                






30 June 2013

number of shares

30 June 2012

number of shares

30 December 2012

number of shares





Weighted average number of ordinary shares in issue

82,568,384

79,388,465

80,720,587





Weighted average number of treasury shares

(237,000)

(237,000)

(237,000)

Weighted average number of shares held in employee benefit trusts

 

(969,114)

 

(1,624,515)

 

(1,367,378)


                       

                       

                       

Basic weighted average number of ordinary shares

81,362,270

77,526,950

79,116,209





Dilutive effect of securities:




Deferred consideration shares

129,674

2,873,040

1,540,918

Share options

295,872

-

-


                       

                       

                       

Diluted weighted average number of ordinary shares

81,787,816

80,399,990

80,657,127





Further dilutive effect of securities:




Share options

4,049,713

4,097,576

3,713,181

Contingent consideration shares to be issued

304,156

44,561

89,127


                        

                        

                        

Fully diluted weighted average number of ordinary shares

86,141,685

84,542,127

84,459,435


                       

                       

                       





Basic earnings/(loss) per share




From continuing operations

1.30p

1.37p

0.16p

From discontinuing operations

0.00p

(0.30)p

(0.65)p

Total basic loss per share

1.30p

1.06p

(0.49)p





Diluted earnings/(loss) per share




From continuing operations

1.29p

1.32p

0.16p

From discontinuing operations

0.00p

(0.30)p

(0.65)p

Total diluted loss per share

1.29p

1.03p

(0.49)p





In addition to basic and diluted earnings/(loss) per share, headline earnings per share and fully diluted earnings/(loss) per share, which are non-GAAP measures, have also been presented.





Fully diluted earnings/(loss) per share




From continuing operations

1.23p

1.25p

0.15p

From discontinuing operations

0.00p

(0.30)p

(0.65)p

Total fully diluted loss per share

1.23p

0.98p

(0.49)p





Headline earnings per share




Headline basic earnings per share

3.05p

2.90p

6.37p

Headline diluted earnings per share

3.03p

2.79p

6.25p

Headline fully diluted earnings per share

2.88p

2.66p

5.97p

 

Basic earnings/(loss) per share is calculated by dividing the earnings/(loss) attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year, excluding treasury shares and shares in employee benefit trusts, determined in accordance with the provisions of IAS 33 Earnings per Share.

 

Diluted earnings/(loss) per share is calculated by dividing earnings/(loss) attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year adjusted for the potentially dilutive ordinary shares for which the conditions of issue have substantially been met but not issued at the end of the year.

 

The Group's potentially dilutive shares are shares expected to be issued as deferred consideration on acquisitions and share options issued but not exercised.

 

Fully diluted earnings/(loss) per share is calculated by dividing earnings/(loss) attributable to ordinary shareholders by the weighted average number of shares in issue during the year adjusted for all of the potentially dilutive ordinary shares expected to be issued in future period whether or not the conditions of the issue have substantially been met. This measure is presented to show the dilutive effect on earnings per share of all shares expected to be issued in the future.

 

Headline earnings per share is calculated using headline earnings for the year, which excludes the effect of restructuring costs, start-up losses, amortisation of intangibles, impairments charges, acquisition accounting adjustments, share option charges, fair value gains and losses on derivative financial instruments and other exceptional costs. The calculation also excludes non-controlling interests over which the Group has exclusive options to acquire in the future.

 

12.   GOODWILL

 


Unaudited

Six months ended

30 June 2013

£'000

Unaudited

Six months ended

30 June 2012

£'000

Audited

Year ended

31 December 2012

£'000

Cost




At beginning of period

71,028

73,823

73,823





Goodwill arising on acquisitions in the period

133

-

-

Adjustment to fair value of deferred consideration

-

-

(8)

Impairment of goodwill

-

-

(2,497)

Exchange differences

337

(77)

(290)


                  

                  

                  

At end of period

71,498

73,746

71,028


                  

                  

                  

 

The adjustment to the fair value of deferred consideration relates to changes in estimate of deferred consideration payable under earn out arrangements for acquisitions before 1 July 2009 in accordance with the terms of the relevant acquisition agreements and therefore not accounted for in accordance with the provisions of IFRS 3 Business Combinations (as revised 2008).

 

13.   ACQUISITIONS

 

Mash

On 25 January 2013, the Group acquired the entire share capital of Mash Health Limited ("Mash"), a healthcare communications consulting company based in the UK.

 

Mash has contributed £1.4m to revenue and £0.4m to profit before tax for the period between the date of acquisition and the balance sheet date. Had Mash been consolidated from 1 January 2013, the consolidated income statement for the period ended 30 June 2013 would show revenue of £71.8m and profit before tax of £1.8m.

 

 

 

 

 

 

 

The provisional fair value of the net assets at the acquisition date is as follows:

 


Fair value

£'000



Client relationships

531

Property, plant and equipment

15

Trade and other receivables

712

Cash and cash equivalents

694

Trade and other payables

(565)

Deferred tax liability

(124)

 

                  

Net assets acquired

1,263

 

 

Goodwill arising on acquisition

133


                  


1,396


                  



 

The fair value of trade and other receivables include trade receivables with a fair value of £567,000. The gross contractual amount of trade receivables is equal to the fair value.

 

Goodwill comprises the value of expected synergies and other opportunities arising from the acquisition, management know how, the skilled work force employed by Mash and other intangible assets that do not qualify for separate recognition. None of the goodwill recognised is expected to be deductible for tax purposes.

 

The fair value of the consideration paid is as follows:

 


£'000



Cash consideration

500

Issue of ordinary shares

127

Deferred consideration

769


                  


1,396


                  

 

 

As part of the consideration for the acquisition of Mash deferred consideration is payable. The amount to be paid is dependent on the profits earned by Mash in the year to 31 December 2013. The fair value of this consideration at the acquisition date was £175,000 and at 30 June 2013 is £175,000. The maximum amount of deferred contingent consideration payable is £175,000. Any changes to the fair value of deferred contingent consideration in the future will be recognised in the income statement.

 

In addition to the deferred consideration, acquisition related employee remuneration of up to £700,000 is also payable to the vendors of Mash.  This remuneration is also dependent on the profits earned by Mash in the year to 31 December 2013 and is recognised in the income statement over that period.

 

 

Newhaven

On 14 June 2013, the Group acquired the trade and certain assets of Newhaven Communications. The net assets acquired and consideration paid were immaterial.



14.   SHARE CAPITAL

 


Unaudited

At 30 June 2013

£'000

Unaudited

At 30 June 2012

£'000

Audited

At 31 December 2012

£'000

Authorised:




100,000,000 ordinary shares of 10p each

10,000

10,000

10,000


                  

                  

                  

Allotted, issued and fully paid




82,683,959 ordinary shares of 10p each

8,268

8,226

8,226


                  

                  

                  





During the interim period the following shares were issued:

 

On 30 April 2012, 486,219 new ordinary shares of 10p each were issued at a value of 39.7p to vendors of businesses previously acquired by the Group and certain employees of the Group. These shares were issued pursuant to the terms of minority share purchases under the share purchase agreements in relation to Blonde Digital Limited, Stripe PR and Communications Limited and Opticomm Media Limited.

 

On 23 May 2012, 3,248,580 new ordinary shares of 10p each were issued at 35.8p to vendors of businesses previously acquired by the Group and certain employees of the Group. These shares were issued pursuant to the share purchase agreements in relation to Fenix Media Limited (which trades as Face Group) and Red Kite Consulting Group Limited.

 

On 28 January 2013, 333,332 new ordinary shares of 10p each were issued at 38.2p to vendors of Mash Health Limited pursuant to the terms of the share purchase agreement of that company.

 

On 10 May 2013, 89,122 new ordinary shares of 10p each were issued at 50.0p to certain employees of the Group. These shares were issued pursuant to the share purchase agreements in relation to Red Kite Consulting Group Limited.

 

15.   CASH GENERATED FROM OPERATIONS

 


Unaudited

Six months ended

30 June 2013

£'000

Unaudited

Six months ended

30 June 2012

£'000

Audited

Year ended

31 December 2012

£'000





Profit on continuing operations before taxation

1,778

1,589

1,380





Loss on discontinued operations before taxation

-

(314)

(617)

Financing income

(10)

(25)

(76)

Finance costs

285

319

712

Depreciation

558

540

1,127

Amortisation of intangible assets

659

431

876

Impairment of goodwill

-

-

2,497

Share-based payment expense

75

65

134

Acquisition related employee remuneration expense

529

24

82

Acquisition costs

66

-

-

(Profit)/loss on disposal of property, plant and equipment

-

(44)

120

Decrease/(increase) in receivables

2,599

2,162

(879)

(Decrease)/increase in payables

(6,248)

(5,893)

  1,479


                 

                 

                 

Net cash inflow/(outflow) from operating activities

291

(1,146)

6,835


                 

                 

                 

 

16.   NET DEBT

 


At 1 January 2013

£'000

Cash flow

£'000

Foreign exchange

£'000

At 30 June 2013

£'000






Cash and cash equivalents

4,148

(755)

56

3,449

Overdrafts

-

(1,616)

-

(1,616)

Loan notes

(498)

84

-

(414)

Bank loans

(12,320)

(24)

(395)

(12,739)

Finance leases

(49)

17

-

(32)


                 

                 

                 

                 


(8,719)

(2,294)

(339)

(11,352)


                 

                 

                 

                 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
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